Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, European indexes traded with some gains. The catalyst for the initial climb was due to the expectations from Asian investors, for the announcement of new measures of monetary stimulus by the Bank of Japan. The liquidity created by this institution is not confined to the local economy and local financial markets. With interest rates and yields on government bonds at very low levels, investors and savers will apply a portion of this liquidity in assets with a higher return (and higher risk). Among these assets appear equities. In addition, the Japanese government has encouraged the Pension Fund to increase its exposure to equity markets (domestic and international). This fund manages about 1,370,000 M. USD of assets. At European level, the main news is the announcement of the capital increase at Credit Suisse. The Swiss bank will conduct a capital increase of 6050 M.CHF, which is part of a broader plan to strengthen capital, to strengthen the asset management unit at the expense of investment unit.
The US market closed with modest losses. The Earnings Season remains the central theme. This Season has been marked by the high percentage of companies providing higher than estimated profits (about 74%) in opposition to a worrying proportion (60%) of companies reporting lower revenue than estimated. While profits depend on various factors (sales, costs, supplies, accounting rules, etc.), revenues depend primarily on demand for goods and services that businesses provide. Such demand depends on the degree of activity of the economies in which they operate. As such, the weakness of the American multinational sales are an alarming sign about the state of the global economy. Still, investors have shown a complacent attitude towards this standard. IBM shares fell 5.50%, a day after it released its quarterly accounts: the fall in revenue was higher than expected, and reduced the company objective of annual profit, as the appreciation of the dollar has highlighted the weak demand observed in China and emerging markets. The start of construction of new homes increased by 6.50% in August, reaching 1.21 million units (annualized number) and surpassing the 1.14 million estimated. The granting of building permits reached the 1.10 million units (annualized), getting short of the 1.16 million estimated. Despite this last issue, the housing market remains one of the most dynamic parts of the economy. Despite representing only 3% of GDP, the housing market has an impact on various economic sectors such as materials, banking, employment and household income (either through wages or because the house is the most valuable asset for many American families), and as such influences the consumption. Today will be one of the most intense days of this earnings season with a few dozen companies in the S & P to report their quarterly accounts.
The Asian session was not uniform. The Tokyo Stock Exchange recorded appreciable gains, due to investors’ expectations that the Bank of Japan will announce new measures of monetary stimulus. A major objective of the Government Abe is to stimulate domestic consumption in order to generate some inflation that definitely away the specter of deflation that plagued the country for over 15 years. In Shanghai, the stock traded in a volatile form, ranging from modest losses and sharper devaluations.